Demand for residential property in Malaysia has picked up amid economic improvement, according to ABN Amro regional research. The company said the increase in demand had allowed M$9.2 billion (about HK$18.81 billion) of residential property to be sold in the first half of the year, representing 37 per cent growth over the second half of 1998. This was 26 per cent higher than the first half of last year. The pick up in demand was most pronounced in Klang Valley, including Kuala Lumpur and Singapore, and in Johor. ABN Amro said sales of residential property had rebounded since the end of last year. Residential developers had taken advantage of improved demand and the home-ownership campaign organised by the government last year until early this year, clearing $2.9 billion worth of inventory nationwide. Under the home-ownership scheme, developers grouped together to sell housing units, which encouraged them to offer discounts of 10 per cent to 20 per cent. ABN Amro said residential property prices were now 10 per cent to 20 per cent below peak levels in 1997. 'There has been increasing appetite for residential units priced below $250,000 as the decline in the base lending rate by 5 per cent to 6 per cent per annum has improved affordability.' Take-up rates at new launches this year have also vastly improved to 70 per cent to 80 per cent, from the height of the recession where take-up rates averaged only 30 per cent to 40 per cent. As a result, prices for residential property in prime locations had risen by 15 per cent to 20 per cent from the lowest level a year ago. At the bottom of the trough, prices had fallen 30 per cent to 35 per cent from their peak in 1997. ABN Amro said the improving economic environment and lower interest rates would continue to spur demand for residential property. There had been a 12.8 per cent increase in the number of loans for the residential property sector, highlighting the rising demand. However, commercial and retail segments of the market were still weak as supply far outstripped demand. At the end of last year there was an excess supply of 20 per cent in Kuala Lumpur office space and 31 per cent in retail space. This was expected to deteriorate with more supply in the next two to three years. Vacancy rates were expected to rise to 35 per cent and 39 per cent for the commercial and retail sectors by 2000. MALAYSIA
